Abstract

SOSA, Miriam; ORTIZ, Edgar  and  CABELLO, Alejandra. Global Financial Crisis and its Impact on European and American Stock Markets Behavior. Rev. mex. econ. finanz [online]. 2017, vol.12, n.3, pp.1-27. ISSN 2448-6795.  https://doi.org/10.21919/remef.v12i3.94.

This paper aims to analyze the impact of global financial crisis on the behavior of the most important European and American stock markets. Symmetric and asymmetric GARCH models with a dummy in the variance equation are employed to model stock market's volatility. Results confirm the crisis impact on the stock indices behavior; increasing volatility and raising the leverage effect, above all in the European markets. The sample period includes daily observations from January 1, 2003 to February 27, 2015.The empirical evidence suggests that the global financial crisis impacted the behavior of the stock markets under analysis increasing their volatility and asymmetry, particularly in the case of the European markets. These findings have important implications on risk hedging and portfolio construction concerning assets from European and American share markets. Originality of this paper consists in analyzing the impact of the global financial crisis, the stock market behavior of the countries under study, applying a methodology previously not employed.

Keywords : Asymmetric Volatility; GARCH; TARCH; Latin America; Financial Crisis.

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